Market sizing layers

Market sizing
New answer on Jul 17, 2021
3 Answers
113 Views
Anonymous A asked on Jul 15, 2021

How many levels on average should you have in your market sizing approach (I know this varies by case but I'm just looking for an average on what's not "deep enough") ..would 3-4 work or is it more 5-6? (Eg population, age group, income, purchasing preference, replacement rate, $ value of service/product)

(edited)

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer
Florian
Expert
Content Creator
replied on Jul 16, 2021
#1 rated McKinsey Case and PEI Coach | 5 years at McKinsey | Mentorship Approach | Imbellus Expert

Hey there,

This depends a bit on the nature of the question. I would not overcomplicate things and as a matter of fact, your answer will not be more precise with 6 levels rather than 4. Although it might create the impression it is more precise...

For instance, if you are talking about the revenue of something, let's say taxi revenue in a city in a given year, look at it the following way:

How many people use it (total population * certain % of the population that uses taxis) * how often are they using it p.a. (average a number and justify it well by comparing high and low user groups) * how much do they pay for it (average a number and justify it well, again by comparing high mileage vs. low mileage groups).

With that approach, you can size the market within 3-4 minutes and will not be less precise than if you were to add age segments or other more granular measures that would just create spurious accuracy. 

Focus on your assumptions and justify them well by comparing your own experience and you should do well.

Cheers,

Florian

Was this answer helpful?
Adi
CoachingPlus Expert
Content Creator
replied on Jul 16, 2021
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience

The deeper you go the harder it could become to analyse and calculate as you will have to make more and more estimates and assumptions. While there isnt a magic number for how many layers, to keep things manageable and avoid analysis paralysis, 3-4 down seems reasonable. But be ready to adapt this based on the case prompt and based on common sense.

Was this answer helpful?
Ian
Expert
Content Creator
replied on Jul 17, 2021
BCG | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

You should go as far as your estimates become more reasonable but not further.

We only break things down because they take us futher away from complete guessing and closer to guesstimating. Focus on this aspect and you will be good.

3-6 is generally the range.

Was this answer helpful?
Florian gave the best answer

Florian

Content Creator
#1 rated McKinsey Case and PEI Coach | 5 years at McKinsey | Mentorship Approach | Imbellus Expert
402
Meetings
9,099
Q&A Upvotes
25
Awards
176 Reviews